‘Negative’ outlook for Gulf sovereign ratings in 2018, says Moody’s

Bahrain’s debt is expected to approach 100 percent of GDP by 2019. (Reuters)
Updated 15 January 2018
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‘Negative’ outlook for Gulf sovereign ratings in 2018, says Moody’s

DUBAI: The outlook this year for sovereign ratings in the GCC is “negative,” according to ratings agency Moody’s in a new report highlighting geopolitical risks and muted economic growth as factors undermining the creditworthiness of the region.
“Although oil prices have risen significantly from their lows in early 2016, most sovereigns in the region will continue to run sizable fiscal deficits and record an increase in their debt burdens over the next 12 to 18 months,” said Steffen Dyck, vice president as senior credit officer at Moody’s.
“In addition, long-standing geopolitical event risks have come to the fore again and will play an important role in defining sovereign credit quality in 2018.”
The report forecast a slight increase in GDP growth of close to 2 percent this year across the GCC.
While regional government debt burdens are set to rise, the report said, the speed of growth will vary from country to country. Bahrain’s debt is expected to approach 100 percent of GDP by 2019.
Kuwait and Saudi Arabia’s debt burdens are forecast to increase, but at lower levels in comparison to Bahrain, according to the report. Qatar and the UAE’s debt is expected to stabilize in 2018 and 2019.
Regional geopolitical tensions are likely to persist in 2018, with Moody’s anticipating that the diplomatic and economic boycott of Qatar by the Saudi Arabia-led group of Arab countries will continue throughout 2018 and possibly longer.
Three out of the six Gulf Cooperation Council (GCC) countries currently have negative rating outlooks, according to Moody’s, with the remaining countries having stable outlooks.
This is an improvement compared to the start of 2017 when four out of six had negative outlooks. Qatar, Oman and Bahrain all saw their credit rating downgraded last year by Moody’s.


Britain unveils “short and sharper” code for companies

Updated 16 July 2018
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Britain unveils “short and sharper” code for companies

  • The new code emphasises the need for boards to refresh themselves, become diverse and plan properly for replacing top jobs
  • Company remuneration committees should also take into account workforce pay when setting director pay

LONDON: Companies in Britain must strive to rein in excessive executive pay and make boards more diverse under a new “short and sharper” corporate code, published on Monday.
The Financial Reporting Council (FRC) has updated its code of corporate standards for publicly listed companies, which must comply with it or explain to shareholders if they do not.
The new code comes as the watchdog, which oversees company governance standards and accountants, faces a review to see if it can uphold high corporate standards to maintain Britain’s attractions as a place to invest after Brexit.
British lawmakers have called for tougher corporate govenance standards following a row between food retailer Tesco and its suppliers and the collapse of retailer BHS and outsourcer Carillion. And shareholders have become much more active in terms of rejecting some executive pay deals.
“To make sure the UK moves with the times, the new code considers economic and social issues and will help to guide the long-term success of UK businesses,” FRC Chairman Win Bischoff said.
“This new code, in its short and sharper form, and with its overarching theme of trust, is paramount in promoting transparency and integrity in business for society as a whole.”
There is a new provision for greater board engagement with the workforce to understand their views — aimed at reinforcing an existing provision in law since 2006 which has had a patchy impact.
This, along with a requiremnent to have “whistleblowing” mechanisms that allow directors and staff to raise concerns for effective investigation, mark the biggest broadening of corporate standards in many years, the FRC said.
“The new code is much stronger on abilities to raise concerns in confidence,” said David Styles, FRC director of corporate governance.
It also emphasises the need for boards to refresh themselves, become diverse and plan properly for replacing top jobs.
It introduces a requirement for companies to explain publicly if a board chair has remain unchanged for more than nine years.
Company remuneration committees should also take into account workforce pay when setting director pay.
“To address public concern over executive remuneration... formulaic calculations of performance-related pay should be rejected,” the watchdog said.